Every move by Warren Buffett in the investment world draws widespread attention. Recently, the billionaire's Berkshire Hathaway has made a bold move in the second quarter—a nearly 50% reduction in its Apple Inc. shares. This decision has not only impacted the market but also pushed Buffett's cash reserves to an astonishing $276.9 billion.
Omaha, Nebraska-based Berkshire Hathaway disclosed this news in a report on Saturday. The company sold a net worth of $75.5 billion in stocks in the quarter, with operating profits increasing from $10 billion in the same period last year to $11.6 billion, showing strong profitability.
Buffett's selling activity occurred as the S&P 500 stock index rose to a historical high. However, market concerns and the risk of economic downturn gradually emerged, especially after mid-July, with the S&P 500 index falling for three consecutive weeks, and dropping 1.8% last Friday due to weak labor force data.
"This is undoubtedly a sell signal," said Jim Shanahan, an analyst at Edward Jones covering Berkshire Hathaway. "The level of selling activity far exceeds our expectations."
In addition to Apple, Berkshire also significantly reduced its stake in Bank of America, its largest banking investment. Since mid-July, Berkshire has cut its position by 8.8%.
Buffett previously stated at the shareholders' meeting in May that he was not in a hurry to spend the cash unless he found investment opportunities with low risk and high returns. Berkshire has recently used stock buybacks as a way to deploy cash, but even this has become more difficult as its stock price hit a historical high. In this quarter, Berkshire bought back about $345 million of its own stock, the lowest buyback amount since the buyback policy changed in 2018.
Although Buffett said at the shareholders' meeting that Apple is "better" than its other two major holdings, American Express and Coca-Cola, his attitude towards building cash reserves seems more open. Analysts Matthew Palazola and Eric Bedell believe that Berkshire's sale of stocks may be to avoid higher capital gains taxes.
Apple reported this week that its third-quarter sales to China fell by 6.5% to $14.7 billion, below Wall Street's expectations. This result has once again raised concerns about Apple losing its edge in one of its most important overseas markets. Although Apple attributed the decline in sales to the strengthening of the US dollar, factors such as intensifying market competition and government restrictions on the use of foreign technology cannot be ignored.
This year, Apple's stock price has risen, and investors are looking forward to new artificial intelligence technology. However, according to Bloomberg News, Apple's upcoming artificial intelligence features will be launched later than expected, missing the first release of the upcoming iPhone and iPad software update, which may affect the company's market performance.
Shanahan said that Buffett's massive sale of Apple shares in the second quarter may indicate that he will continue this action. "Now, selling all of Apple's shares is possible," he said.
As Buffett adjusts his strategy, the market will closely watch his next moves and how they will affect the global stock market and investment trends.
